Generally, the difference involves the “timing” of the depreciation expense on a company’s financial statements versus the depreciation expense on the company’s income tax return. The depreciation expense in each year will be different, but the total of all of the years’ depreciation expense associated with a specific asset [...] Continue Reading…

Before we answer your question, you should keep in mind that many people use these terms interchangeably and will not make the distinction that we show below.

We will illustrate the terminology problem with the following example. Let’s say your company is in the catering business and will cater its [...] Continue Reading…

The Social Security tax is 6.2% and is based on each employee’s wages (including salaries, bonuses, commissions, etc.) up to the first $94,200 of annual wages in the year 2006. (The base amount increases each year.) The Social Security tax is withheld from each employee’s wages and is also [...] Continue Reading…

The term “deferred expense” is used to describe a payment that has been made, but it won’t be reported as an expense until a future accounting period.

For example, a corporation might spend $500,000 in accounting, legal, and other fees in order to issue $40,000,000 of bonds payable. Rather than [...] Continue Reading…

Transportation-in or freight-in costs are part of the cost of goods purchased. The cost of goods (or any asset) includes all costs necessary to get an asset in place and ready for use. Transportation-in costs are allocated to the products purchased and will “cling” to the products. Those products [...] Continue Reading…